Thursday, December 22, 2011

European Debt and GDP Infographic

This graphic is easy to figure out, but the colors bug me (click it to enlarge).

Countries are ordered from smallest to largest, with the blue square indicating the size of the countries GDP.

The countries debt/GDP ratio* is then plotted as a red square, who’s area is the country’s ratio times its GDP. Orange blocks indicate countries who’s debt/GDP ratio exceeds 100%.

This does a good job of highlighting why Greece and Italy are problems. Portugal too. It’s not so good on Ireland (which has gotten better), Spain (which has also gotten better, but not that much), and Belgium (which isn’t really on anyone’s radar screen yet).

Belgium is an interesting story. Maybe they should be a problem that people talk about. But they’ve had an interesting problem: they have a parliamentary government, had an election, no one could form a majority coalition, and they went without a ruling party for almost 2 years. This makes me wonder if no one is worried about Belgium because there was no Belgian government to whine about how awful things were. That’s a scary thought.

* The debt/GDP ratio is a popular, but problematic, measure. National debt is like the balance on your credit card or mortgage. GDP is like the size of your paycheck. You’d never compare the two for a household because the one is a stock variable and the other is a flow variable. For example, my debt/GDP ratio is much higher than the typical student’s because I have a mortgage on a house big enough for a family. It’s better to do a stock to a stock comparison (like debt to assets on a balance sheet) or a flow to a flow as on income statements (like debt payments to GDP). If you dig through the news, the details are always about Greece’s or Italy’s debt payments that are coming due.